Discounts or Scholarships? 50% off a College Education?

It may sound strange, but if your family received a “scholarship” to buy a car would it lead you to buy it? We encourage college parents to consider the implications for your own college admissions experience and be careful to understand the difference between a true scholarship from what would otherwise be viewed as a discount.

National Public Radio reports the “National Association of College and University Business Officers released its latest survey of tuition discounts at private, nonprofit, four-year colleges and universities. NACUBO this year [2015] looked at 411 schools, and the survey found two things: almost no one pays full price, and the discounts are quite steep. They estimate 89 percent of first-time, full-year freshmen received some kind of discount in 2014-2015. Of those students, the average grant they received is estimated to cover 54.3 percent of tuition and fees. In other words: more than half off. These discount rates are climbing fast.

They are the highest recorded since the study began in 2000.” The NACUBO data is similar to a national study conducted by Ruffalo Noel Levitz, a respected enrollment management consulting firm to colleges and universities. The insight and data they provide to schools and consumers is noteworthy.

At the same time, the language of discounts can be confusing to both institutional leaders and families. As a result, Ruffalo Noel Levitz – publishes a clear definition of the Overall Discount Rate. Although the NPR article goes on to say that “colleges aren’t in the habit of calling lowered prices “discounts.” They talk instead about institutional grants, or need-blind admission, or merit- and need-based financial aid, or the difference between the “sticker price” and “actual price.”

Starting near the time of College Parents of America’s founding in 1997, colleges and universities began to recognize that their retail pricing strategy has value to driving the perceived value of their institutions. In fact, some experts suggest that enrollment management consultants helped schools to foster the consumer perception that high priced colleges also created the perception of higher quality schools. The higher the cost, the higher the perceived value of parents, families and alumni.

We agree with NPR that “it’s important to scrutinize the pricing strategies used in higher education and their consequences.” The social importance of the affordability and accessibility of a college degree is vital. We suggest that students and their families recognize that “Truth in Advertising” applies to the investment they make in higher education. It is worth asking:

How are 18 year old students able to understand or decline a $30,000 “scholarship” when in fact may be more accurately described as a discount?

How are parents to know when a “scholarship” is really a discount or unfunded gift aid?

What is also troubling is that “scholarships” that are only a discount may actually be viewed as an “inducement” to invest 2 or 3 times the value of the discount to complete a consumer purchase. For families that are are most financially vulnerable, discounts that do not cover the entire cost of attendance are likely to lead to more student / family debt.

As a result, College Parents of America continue to advocate for greater transparency by schools and encourage families to become prudent consumers. Look for more discussion on this topic, perhaps we should consider the use of institutional “scholarships” and require institutions to only describe a “scholarship” as funds that come from university endowments or non-related organizations – employers, non-profits (such as the American Legion) etc.

This is a complex topic for schools, society and our families. We welcome your feedback. What other suggestions do you have?